Astera Labs ALAB shares have surged 48.4% in the past month, outperforming the broader Zacks Computer & Technology sector’s return of 5% and the Zacks Electronics - Semiconductors industry’s decline of 2.2%.
Broadcom AVGO is making strong efforts in the peripheral component interface express (PCIe) retimers market and has lagged ALAB over the same timeframe. Broadcom shares have lost 1.2%.
Astera Lab’s outperformance can be attributed to the increasing demand for AI servers and data center infrastructure.
One Month Performance
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ALAB is also benefiting from strong contributions across its product families, which include Aries, Taurus, Leo, and the newly launched Scorpio Smart Fabric Switches.
ALAB achieved a record third-quarter 2024 revenues of $113.1 million, marking a 47% jump sequentially and 206% year-over-year growth.
Expanding Portfolio to Boost ALAB’s Prospects
Astera Labs has been at the forefront of technological innovation, particularly in the development of connectivity solutions that are critical for AI and cloud infrastructure.
Expanding its portfolio, in the third quarter of 2024, ALAB introduced its Scorpio Smart Fabric Switches, purpose-built for AI infrastructure at cloud scale, featuring P-Series for PCIe Gen 6 connectivity and X-Series for GPU clustering. Scorpio is expected to significantly enhance Astera Labs’ total market opportunity, which is projected to exceed $12 billion by 2028.
In June, ALAB introduced the industry’s first demonstration of end-to-end PCIe optical connectivity for larger, disaggregated GPU clusters, expanding its Aries family of Smart DSP Retimers and Smart Cable Modules for enhanced data center connectivity.
The company’s robust PCIe retimers under the Aries product line highlight significant growth opportunities for Astera Labs in the PCIe retime market.
According to Valuates latest report, the global PCIe retimer market is expected to witness a CAGR of 46.8% between 2024 and 2030. This reflects solid growth opportunity for ALAB.
Strong Partner Base Aids Prospects
Astera Labs has made a significant impact on the AI industry with its collaborations with top chipmakers like NVIDIA NVDA, Advanced Micro Devices AMD, Micron Technology, and Intel.
Astera Labs products are used in NVIDIA’s GB200 product. It is expected that PCIe switch may play a key role in future NVIDIA products. This collaboration further emphasizes the influence of Astera Labs in the development of advanced AI technologies.
AMD also continues to utilize Astera Labs solutions to enhance the efficiency and scalability of its AI-driven products. The partnership strengthens both companies' positions in the AI market, fueling advancements in next-gen technologies.
ALAB’s Earnings Estimates Show Upward Movement
ALAB’s continued demand for its AI-related products and an expanding customer base are expected to drive top-line growth.
For the fourth quarter of 2024, Astera Labs continues to expect strong growth from the Aries product family across diverse AI platforms, ramping Taurus SCM for 400-gig applications and additional preproduction shipments of Scorpio P-Series switches.
For the fourth quarter of 2024, ALAB expects revenues between $126 million and $130 million, which indicates growth of 11%-15% year over year.
For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $128.20 million.
Non-GAAP earnings are expected to be between 25 and 26 cents per share. The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 26 cents per share, indicating an increase of 36% in the past 30 days.
Astera Labs, Inc. Price and Consensus
Astera Labs, Inc. price-consensus-chart | Astera Labs, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
What Should Investors Do With ALAB Stock?
ALAB stock is not so cheap, as suggested by the Value Score of F.
In terms of the forward 12-month Price/Sales, ALAB is trading at 27.86X, higher than the industry’s 6.2X.
Price/Sales (F12M)
Image Source: Zacks Investment Research
Despite strong product portfolio, ALAB faces increasing competition in the AI and cloud markets, particularly from larger semiconductor companies that are also ramping up their product offerings for AI infrastructure which is a concern.
Astera Labs currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
